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A Step By Step Guide To Understanding Oanda’s Order-book

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The order-book provided by Oanda is one of the most important tools to use in your trading of the forex market. It is the only tool to my knowledge which shows real time information about where large amounts of orders are located in the market along with where traders have placed their trades.

I know that a lot of traders who are new to the order-book have trouble reading the information it presents to about the market. Because of this I decided to make a small guide which will explain everything about the order-book.

The layout, the graphs – what the graphs themselves show and which currencies you should view open orders and open positions for.

To begin, I think its best If I run through the layout of the order-book and explain what some of the different options do.

The Layout Of The Order-book

The order-book is layed out in a very simple way, in fact just recently Oanda seems to have changed the layout slightly to show the information is an easier to use way. Before the update, the candlestick chart along all of the currencies you can view open orders and open positions for were all found to the right of the screen with the graphs for both the open orders and open positions found on the right.

Now everything is displayed vertically which overall makes it a lot easier to use and read the graphs.

Above the graphs you can see options to select which currencies you wish to see open positions and open orders for.

Whilst its possible to select between 16 different currencies to view data for including Gold and Silver, I recommend you stick to only looking at the open positions and open orders data for EUR/USD and USD/JPY. The reason why is because the other currencies along with Gold and Silver are not traded much by the people who use Oanda as their broker. What this means is the open orders and open positions data we see on the graphs are not reliable to use in our trading because they only account for a small percentage of the traders using Oanda.

If you look at the open positions and open orders graph for USD/JPY and then look at the graphs of a currency like EUR/AUD, you’ll see there is a big difference between what the bars on the graphs look like. On EUR/AUD you’ll find the bars which show the open orders and open positions are spiky and tend to be concentrated at one price level. On USD/JPY you’ll see the orders and positions are spread across a much larger range of prices telling us far more people have trades and orders placed on USD/JPY than they do on EUR/AUD.

Below the two graphs you’ll see a small candlestick chart.

The candlestick chart is based off the 1 hour time-frame so each one of the candles you see represents 1 hour’s worth of trading.

Something which I think a lot of people dont realize is when you select a candle to see what the open orders and open positions are, the candle you select shows what the orders and positions were for the previous hour, not the hour you have selected.

The last thing you need to do when you have the graphs open in your browser is to make sure you always click the zoom option next to where it says Non – Cumulative. Clicking this will make easier to see where the orders/positions are located in the market. Also make sure you keep the graph display on Non – Cumulative, selecting the other options will display the orders and positions in a simpler way but you wont be able to see the exact prices where the orders/positions are located.

The Open Orders Graph

Now I’ve gone over the basics of the order-book we’ll take a look at how to read each individual graph and the information it shows us about the market.

We’ll start with the open orders graph…..

The open orders graph shows us all of the pending orders to buy and sell which the traders using Oanda currently have placed in the market.

The bars on the graph show where these orders are located and how many of them are placed at a certain price, the bigger the bar is, the larger the amount of orders found at that price.

There are two types of pending order we can identify using the graph.

Stop loss orders placed by traders with open trades.

Pending orders to buy or sell placed by traders who want to enter the market.

Oanda doesn’t actually specify which orders are stop losses and which are orders to place trades, but with a little bit of investigation its easy to see which is which.

The graph is split into 4 quadrants, as you can see I’ve used a circle to mark each quadrants to make things easy for you to follow.

The top left quadrant marked with a red circle shows all of the open sell orders which have been placed ABOVE the current market price. ( the market price is shown on the graph with a green line )

These sell orders are pending orders to sell which will execute a sell trade upon the price hitting them. They are not sell stop orders placed by traders who have buy trades currently open in the market.

On the quadrant to the right of this ( marked with a purple circle ) we can see the buy stop orders from traders who have got open short trades placed.

The bottom left quadrant shows the sell stop orders from the traders who have buy trades currently placed in the market.

And finally the quadrant on the bottom right are the pending orders to buy placed by traders who want to go long in the market.

It’s a good idea to mark where the orders are on your charts at the beginning of each trading day and watch to see how the market reacts upon the different types of orders being hit.

Also you can learn a lot by checking how the orders change after different markets events. A good example is when the market makes a new high or low you tend to see a small amount of buy or sell stop orders appear around the halfway point of the swing which made the new high or low.

The Open Positions Graph

The open positions graph displays in exactly the same way as the open orders graph but the information the bars on the graph show us about the market are very different.

Whereas the open orders graph shows us all of the orders which have been placed by the traders using Oanda, the open positions graph shows us at what price the traders using Oanda have trades open from. Similar to the open orders graph the size of the bars on the open positions graph tell us how many traders have trades open in the market.

In the top left quadrant marked with a blue circle we can see how many traders are in profitable open short positions.

The quadrant marked with a green circle we can see the traders who are currently in open losing short trades.

The quadrant to the left of this ( marked with a red circle ) represent the traders who have profitable long trades open.

The quadrant above ( orange circle ) show the amount of traders who have long trades open which are at a loss.

All the blue colored bars show trades who have trades open which they are currently at a loss on and the orange colored bars show you the traders who have trades open which are profitable.

The open positions graph is much better for learning about how traders trade and make decisions than the open orders graph.

By studying how the positions change over time you can get a sense of how people in the market react to certain events. For example if you look at the open positions graph before a big news event comes out and then look at it after the news has come out you’ll see a large percentage of traders will have placed trades in the direction of which the news event has caused the market to move.

Summary

I hope with this guide you now have a much better understanding of how to use Oanda’s order-book and what the open orders and open positions graphs show you about the traders in the market. If there is anything on the order-book which your still not sure about, let me know in the comment section and I’ll explain what it means to you.

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Comments

How much ℅ of total trading volume does the order book with Oanada represent? For example, the order book you talked about is the orders placed with Oanada. What about the orders placed with other brokers, are they also represented in this order book?